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Natural Gas Poised to Break Higher

David Becker
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www.iforex.com
Natural Gas Poised to Break Higher

Natural gas prices remain at the top end of the current range with the UNG (United States Natural Gas Fund) 7% off the 2.5 year high. Natural gas continues to see solid production, but demand has increased pushing inventories down below 5-year lows ahead of the summer demand season.

While Northeast and Mid-Atlantic prices fell heading into the weekend, the Henry Hub price, which reflects prices of states near the Gulf of Mexico region, rose slightly. Trade reports attributed this to warm weather in the region and increased cooling demand, as maximum temperatures reached into the 80s and even 90s in the Gulf region.

According to the Energy Information Administration in their estimate of inventories for the period ending April 11, 2014, working gas in storage was 850 Bcf (billions of cubic feet). This represents a net increase of 24 Bcf from the previous week. Stocks were 850 Bcf less than last year at this time and 1,010 Bcf below the 5-year average of 1,860 Bcf.

In the East Region, were natural gas is highly consumed, inventories were 460 Bcf below the 5-year average following net injections of 6 Bcf. Stocks in the Producing Region were 418 Bcf below the 5-year average of 789 Bcf after a net injection of 10 Bcf.

The UNG ETF is consolidating but momentum is strengthening. Long-term resistance is seen near the 200-week moving average at $30 per share. The MACD (moving average convergence divergence) index is printing in positive territory with an upward sloping trajectory. The RSI (relative strength index) has moved higher and is now printing near 61, which is on the upper end of the neutral range. The next level of trader resistance is the 2014 highs seen near $28, while support on the ETF is seen near $24

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